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Sherwood v. Johnson

Decided: March 14, 1991.


On appeal from the Division of Workers' Compensation.

King, R.s. Cohen and Stern. The opinion of the court was delivered by King, P.J.A.D.


[246 NJSuper Page 531] We granted leave to appeal in this case to decide if the Division of Workers' Compensation had jurisdiction to adjudicate

the liability of an allegedly negligent insurance broker and his errors and omissions carrier to its principal, the injured workman's employer. We conclude that the Division has no jurisdiction over a claim by an employer against its broker and his professional liability insurance carrier brought on the ground that the broker negligently failed to provide appropriate workers' compensation coverage as requested. We reverse.

Petitioner Max Sherwood filed a claim petition in August 1989 alleging a work-related accident in May 1989 while employed by E.H. Johnson (Johnson), the respondent in the Division. Johnson admitted the employment relationship but denied a compensable accident. Johnson also admitted that it was uninsured for workers' compensation purposes.

Sherwood then moved to join Frank McHugh Agency (McHugh) and its errors and omissions insurance carrier, Utica Mutual Insurance Company, in the Division as corespondents on the theory that McHugh negligently failed to write the requisite workers' compensation policy for Johnson as requested. McHugh did produce a general comprehensive liability policy with Harleysville Insurance Company for the policy period encompassing the date of the accident. Sherwood also joined the Uninsured Employers' Fund because of Johnson's uninsured status. See N.J.S.A. 34:15-120.1 to -120.8. The Fund is liable for medical expenses and temporary disability benefits only, not for permanent disability benefits. See N.J.S.A. 34:15-120.2, as amended L. 1988, c. 25, § 2. The Fund is subrogated to the rights of the employee to the extent of any payment. N.J.S.A. 34:15-120.5.

The Judge of Compensation concluded that the Supreme Court's decision in Williams v. Bituminous Casualty Corp., 51 N.J. 146, 238 A.2d 177 (1968), had sufficiently expanded the Division's jurisdiction to allow adjudication of this type of liability insurance claim. The Division has "exclusive original jurisdiction of all claims for workers' compensation benefits under this chapter." N.J.S.A. 34:15-49.

We have recently reiterated that "the Division may only exercise these powers expressly allocated to it or those which are fairly implied as an incident to its expressly granted powers." Hajnas v. Englehard Mining & Chem. Co., 231 N.J. Super. 353, 361, 555 A.2d 716 (App.Div.1989). The Division is a specialized administrative agency, not a court of law with general jurisdiction to decide common-law rights. See Young v. Western Elec. Co. Ins. Inc., 96 N.J. 220, 225-231, 475 A.2d 544 (1984). The claim asserted here arises from a breach of common-law duty by McHugh, the insurance broker, to its client, Johnson. See Rider v. Lynch, 42 N.J. 465, 476-477, 201 A.2d 561 (1964). A jury trial on this money damage claim is guaranteed under our constitution. See Weinisch v. Sawyer, 123 N.J. 333, 344, 587 A.2d 615 (1991).

The subject of the Division's jurisdiction over ancillary insurance disputes was discussed in Williams in dictum by Chief Justice Weintraub:

We should add a word about the carrier's sweeping contention that the Division of Workmen's Compensation cannot settle a coverage dispute even if the carrier is a named party to the compensation proceeding. The carrier cites Goldmann v. Johanna Farms, Inc., 26 N.J. Super. 550, 555 [98 A.2d 142] (Cty.Ct.1953). See also, United National Indemnity Co. v. Sangiuliano, 38 N.J. Super. 400, 411 [119 A.2d 35] (Law Div.1955), and Jordan v. Ferro, 67 N.J. Super. 188, 197 [170 A.2d 69] (Cty.Ct.1961). Its position may be traced to a statement in [ American Mut. Liability Ins. Co. of Boston v. ] Chodosh, supra, 123 N.J.L. [81], at p. 84 [8 A.2d 64 (1939)], that "the jurisdiction of the bureau [now the Division of Workmen's Compensation] extends only to whether the injury or death by accident arose out of and in the course of the employment. It has no authority to determine an issue like the one here presented." We see no reason why the Division cannot pass upon coverage. Surely where coverage depends, as here, upon a simple finding of fact, there is no visible barrier. But even if a complex issue of policy or statutory construction is involved, we see no reason to say the Division lacks "jurisdiction." Since the statute permits a direct proceeding in the Division against the carrier, it reasonably imports authority in the agency to decide whether the carrier covers the claim. See, 2 Larson Workmen's Compensation Law § 92.40, p. 448 (1961). Chodosh should therefore be read to mean only that there was no jurisdiction over the coverage issue in that case because the carrier was not a named party to the compensation proceeding. [ Williams v. Bituminous Casualty Corp, 51 N.J. at 152-153, 238 A.2d 177].

In Williams the Supreme Court addressed the workers' compensation coverage dispute between the employer, and inferentially the affected employee, and the workers' compensation carrier. The statutes discussed in Williams concerned only the workers' compensation insurance policy covering the employer. See N.J.S.A. 34:15-83; :15-84; :15-85; :15-86. We find nothing in Williams which suggests that the Division has jurisdiction over a common-law dispute between the employer and its insurance broker or the broker's professional liability carrier. The entire discussion in Williams concerned the workers' compensation policy. We are loathe to extend its ambit to ...

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